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Sustainable Competitive Advantage and Knowledge-Based Resources

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A common source of intra-industry performance variations is pegged upon the differences in enterprises’ utilisation of organisational resources and capabilities (Spender, 1996; Teece et al., 1997). In the event that resources are valuable, rare, difficult to imitate, and seemingly non- substitutable – they could be a source of enterprise competitive advantage (Barney, 1991). An enterprise’s capability to effectively create, manage and exploit knowledge-based assets – represents one such a vital resource (Matusik & Hill, 1998). Thus, being a bundle of knowledge-based capabilities, ACAP could be a source of an enterprise’s competitive advantage.

Acknowledging that several ways exist in which an enterprise could realise a competitive advantage, two of the most predominant ones in dynamic markets comprise innovation and strategic flexibility (Barney, 1991). Following this cue, the transformation and exploitation capabilities that embody RACAP are likely to influence firm performance through – product and process innovation. Such that, for instance, firms may require knowledge leveraging and recombination skills – to pursue product line extensions and/or new product development (). RACAP embodies transformation capabilities, whereby through the process of bisociation, aid enterprises to develop new perceptual schemas and/or changes to existing processes. Correspondingly, exploitation capabilities further calibrate this process by converting knowledge into new products and/or services (Kogut & Zander, 1998). Noting that RACAP embodies knowledge exploitation – it could markedly enhance performance and consequently, affirm a competitive advantage (March, 1991; Liebeskind, 1996).

It has been noted in well-established scholarly quarters that enterprises most likely exhibit performance differences as evidenced by their capability development from differing starting points (Eisenhardt & Martin, 2000). In the long-term, however, these capabilities tend to converge within an industry standard, wherein competitor capabilities become similar in key attributes. This resulting equifinality renders sustaining a competitive advantage an arduous undertaking, because capabilities could be fungible and effortlessly substituted – induced by commonalities in their key attributes (Eisenhardt & Martin, 2000; Zahra & George, 2002).

Other arguments suggest alternative depictions, for instance, by postulating that the timing of capability deployment and the differential costs associated with organisational change among enterprises could sustain performance differences amongst them (Zott, 2001). On a similar vein, notwithstanding equifinality tenets in capabilities, the centrality of a competitive advantage is pegged upon an enterprise’s ability to proactively identify and respond to environmental cues prior to significant performance-oriented benefits (Cockburn et al., 2000). Hence, enterprises could possess similar capabilities, however, performance differences germinate from the differing developmental paths that they follow and the timing of the deployments of these capabilities.

As such, PACAP would be path dependent and influenced by it’s past experiences, which may determine an enterprise’s success or failure (). Under this development, enterprises may fall into three types of competence traps: familiarity, maturity, and propinquity (Ahuja & Lampert, 2001). Familiarity traps arise from an overdependence to refine and improve existing knowledge, which impedes the enterprise from exploring alternative knowledge sources, and therefore, limiting organisational schemas. Maturity traps arise from a desire to realise reliable and predictable outputs, which could impede knowledge exploration. Propinquity (nearness) traps pertain to an enterprise’s disposition to explore knowledge within close proximities to its existing expertise, which preclude an examination of radical shifts within an industry. These competence traps tend to render enterprises a myopic view of radical innovations that could transform their industry, resulting to enterprise failure (Christensen, 1997; Zajac & Bazerman, 1991). A highly recommended strategy for overcoming such unwarranted myopic impediments include organisation learning endeavours, which would mitigate the risk of missing a window of opportunity witnessed during an industry’s radical shifts.

Therefore, enterprises endowing well-developed capabilities of accessing and assimilation (PACAP) are more likely to be adept at constantly recalibrating their knowledge stock – by identifying trends within their external environment and internalising this knowledge and as a result, be able to overcome some of the aforementioned competence traps. Being adept comprises two dimensions: timing and cost. Initially, a functioning PACAP aids enterprises in monitoring changes within their industries more effectively and as such, facilitates the deployment of pertinent capabilities, for instance – production and technological competencies, at an opportune juncture. For example, prior works have posited that core competencies that are grounded in learning ideally undergird the footing of sustained competitive advantages (e.g, Lei et al., 1996). Correspondingly, noting that capabilities are subsumed within an enterprise’s routines, as an enterprise gains experience that enables it to more effectively manage its routines, the costs emanating from capability development decrease in the long-term. A functioning PACAP minimises sunk investments in altering an enterprise’s resource positions and operational routines. Hence, the costs of change are likely to be minimal when enterprises have accumulated sufficient knowledge and prior experience with the new knowledge and/or skill base (Teece et al., 1997; Zander & Kogut, 1995; Zott, 2001).

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PACAP assumes an important role in renewing an enterprise’s knowledge-based and the pertinent skills to compete in evolving markets. Enterprise’s that are flexible in utilising their resources and capabilities could reconfigure their resource bases to capitalise upon emerging strategic opportunities (Raff, 2000). Such opportunities could aid enterprises to sustain superior performance, owing to first mover advantages. Hence, ACAP’s components could engender a sustainable competitive advantage in the event that it is effectively deployed, in tandem with an enterprise’s other complementary assets and resources. This development would suggest that enterprises endowing robust knowledge transformation and exploitation capabilities (RACAP), could more likely realise a competitive advantage for instance, in product development and overall innovative endeavours – in comparison to those with mediocre capabilities. Correspondingly, enterprises endowing robust knowledge accessing and assimilating capabilities (PACAP), could more likely realise a sustainable competitive advantage owing to their heightened flexibility in reconfiguring enterprise resource bases and in effectively timing capability deployment at a minimal cost – in comparison to those with mediocre capabilities.

Of essence, a factor that could affect an enterprise’s sustained competitive advantage, herein, as reflected by an E.F.SME’s ability to amplify the effective management of the accessed new market and technological knowledge resources (in tacit and explicit form) derived from its varied alliance portfolio partners – pertains to the regime of appropriability. Regime of appropriability appertains to the institutional and industry dynamics that affect an enterprise’s ability to insulate the advantages of new products and/or processes, hence – furnishing potential varied heightened benefits, therein (Antonelli, 1999; Buzzacchi, Colombo, & Mariotti, 1995). In the event that appropriability is low (i.e., experiencing high-level spill-over effects), investments in ACAP are likely to be depressed (Spence, 1984). Under these circumstances, investments might be ill-advised because imitation by rivals might be widespread (Boisot & Griffiths, 1999). In a rejoinder, the positive absorption incentive pertaining to spill-overs could suffice in some situations – to offset the negative appropriability incentive (Cohen & Levinthal, 1990). This occurrence signifies that in the event that regimes of appropriability are robust, the payoff from RACAP could be heightened, because enterprises may protect their knowledge assets and continue to generate profits from such innovative endeavours. Furthermore, in the presence of robust regimes of appropriability, enterprises would for instance, patent their inventions and insulate revenue streams, derived from innovative actions (Anton & Yao, 2000).

Such robust regimes of appropriability entail that imitation is likely to be arduous, owing to rivals’ heightened knowledge replication costs, and as such – contributing to performance differences across enterprises. Correspondingly, under weak regimes of appropriability, dynamic capabilities could sustain performance differences – in the availability of isolating mechanisms. Isolating mechanisms pertain to the idiosyncratic features of an enterprise’s management that creates insulations to imitation (Rumelt, 1987). Of noteworthy significance, barriers to imitation may not necessarily create a competitive advantage. Rather, these barriers could purely be defensive in nature and as such, contribute towards sustaining and most likely, reinforcing a hitherto existing competitive advantage (Zott, 2001). An example of an isolating mechanism is the secrecy of organisational routines and processes. For instance, some enterprises are more receptive to secrecy over patenting, which may furnish competitors with widespread information (Cohen et al., 2000). In this instance, inventions customarily have limited legal protection, such that information disclosure within patents could furnish sensitive information that would enable rivals to circumvent the process and as a result, realise the desired output (Anton & Yao, 2000). Therefore, under weak regimes of appropriability, enterprises could likely sustain performance differences by developing isolating mechanisms, and as a consequence – potentially stymie knowledge spill-overs.

An implicit depiction of ACAP is that these sorts of capabilities could be socially complex and hence, difficult to imitate (Teece et al., 1997). This argument contends that enterprises could sustain performance differences under different regimes of appropriability, in the event that they develop and utilise isolating mechanisms. For example, in industries that endow low regimes of appropriability, enterprises need to expend more effort into developing their ACAP. This endeavour would be directed towards formulating in-house innovation capabilities, as opposed to depending on information disclosures and/or possible knowledge spill-overs from rivals. Such investments engender auspicious economic returns in the long-term by enabling enterprises to possibly develop disruptive innovations. These arguments suggest that the regime of appropriability possibly moderates the relationship between RACAP and sustainable competitive advantage, herein operationalized as – a focal E.F.SME’s ability to amplify the effective management of the accessed new market and technological knowledge resources (in tacit and explicit form) derived from its varied alliance portfolio partners. Furthermore, under robust regimes of appropriability, a significant positive relationship between RACAP and a sustainable competitive advantage should hold, owing to the heightened costs bored through imitation. In addition, under weak regimes of appropriability, a significant positive relationship between RACAP and a sustainable competitive advantage should hold, exclusively in the event that enterprises insulate their knowledge assets and capabilities via isolating mechanisms. In the absence of such an inherent undertaking, such a relationship is likely to be weak or non-existent, therein.

Taken together, and by referencing the aforementioned postulations, it would appear that a superior level of ACAP would be developed and established, whereby for instance, E.F.SMEs would likely be able to amplify the effective management of the accessed new market and technological knowledge resources (in tacit and explicit form) derived from their varied alliance portfolio partners.

In this view, the developed and established superior ACAP, in conjunction with its two dimensions of PACAP and RACAP, would most likely aid an E.F.SME to act in a superior ambidextrous manner. Acting in a superior ambidextrous manner refers to the idiosyncratic ability to effectively manage internal organisational exploration and exploitation activities that leads to ascertaining the likelihood of realising the successful enhancement of an enterprise’s sustained entrepreneurial growth endeavours.

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Sustainable Competitive Advantage and Knowledge-Based Resources. (2022, September 15). Edubirdie. Retrieved December 11, 2023, from
“Sustainable Competitive Advantage and Knowledge-Based Resources.” Edubirdie, 15 Sept. 2022,
Sustainable Competitive Advantage and Knowledge-Based Resources. [online]. Available at: <> [Accessed 11 Dec. 2023].
Sustainable Competitive Advantage and Knowledge-Based Resources [Internet]. Edubirdie. 2022 Sept 15 [cited 2023 Dec 11]. Available from:
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